TaxTMI 
TaxTMI 
2026 (5) TMI 366
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....ars to have initially challenged the Impugned Order dated 15.03.2018 before the Hon'ble High Court of Madras, Madurai Bench by filing a Writ Petition under Article 226 of the Constitution of India; the Hon'ble High Court, vide its Order dated 19.10.2022 in W.P (MD) No. 13887 of 2018, however, dismissed the same with liberty to file a statutory appeal within a period of 3 weeks from the date of receipt of a copy of the Order. Appellant appears to have challenged the Order of the single Judge by filing a Writ Appeal which was also dismissed granting liberty to the Appellant to file statutory appeal within a period of 3 weeks from the date of receipt of a copy of the Order, vide Order dated 11.07.2014 in W.A (MD) No. 1131 of 2024. Resultantly, present Appeal was filed by the Appellant before this forum. 3. Facts in brief, which are necessary for disposal of this Appeal are that the accounts of the Appellant were subjected to audit by an Internal Audit Team from the Department during the month of January 2014 and it was noticed that the Appellant did not discharge duty liability on Titanium Concentrates such as 'Ilmenite'; and Rutile during the period from 01.03.2011 to 07.06.2002. ....
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....ical treatment or special process including roasting or chemical treatment is carried out. After completion of the process, the separated mineral sands had the same properties as they had at the time of import. No up-gradation or augmentation of purity of the mineral sands took place during the processes. Technical opinion given by an expert in the field also vouched that the properties in both the imported Titanium Ore and the processed Titanium Ore remained the same both at the time of import and after processing. Therefore, in view of the decision of CESTAT in the case of M/s. Indian Rare Earths Limited Vs CCE [2002 (139) ELT 352 (Tri.-Kol)] as affirmed by the Hon'ble Supreme Court in 2009 (241) ELT A70 (S.C), no liability to duty arises. (ii) Even CBEC has clarified vide Circular dated 17.02.2012, that levy of excise duty is attracted only in cases where the product satisfies the definition of 'Concentrate' as per HSN Notes which read 'ores which have had part or all of the foreign matter removed by special treatment either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport', whereas it is the Appellant's c....
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....dent-Commissioner, however, confirmed the proposals made in the SCN, by recording the following findings: (i) In view of the order of CESTAT in the case of M/s Indian Rare Earths Limited reported in 2016 (338) ELT 274 (Tri. Kolkatta), Appellant's contention that in the absence of the Ores being subjected to any chemical treatment or special process including roasting or chemical treatment, the resultant products did not merit classification as mineral Concentrates could not be accepted. Therefore, the processes undertaken by the Appellant on the imported / indigenously procured Limenite sand and Rutile sand resulting in emergence of the products marketed by the Appellant as Hi grade sands, namely 70% grade and 80% grade resulted in conversion of Ores to Concentrates thereby constituting manufacture under Clause (ii) of Section 2(f) read with Note 4 of Chapter 26 of CETA, 1985. (ii) Board's Circular dated 17.02.2012 and the case laws relied upon as to the binding nature of Board's instructions are of no use since in the mechanical process undertaken in Wet Plant of the Appellant and in Dry Plant (in the case of processes undertaken at the 100% EOU Plant which are s....
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.... and clearance of Concentrate would attract Central Excise duty (para 32.2). (vi) Opinion of the welding rod manufacturer can at best be regarded as the view specific to his product. Moreover, this suggestion in the Show Cause Notice is not the main basis for confirming the demand (Para 33.2). (vii) The information contained in relied-upon documents viz., Trading and P&L account that payments were towards 'wages to labourers' and 'Power consumed' and in Form CT-3 declaring the nature or business or profession carried out as Mixing, Processing and manufacturing of rare earth products from Ore/sand of Minerals conclusively prove that the Appellant carried on the manufacture of goods for which duty has been demanded. The above Order-in-Original has been assailed by the tax-payer in this Appeal. 6. In the Grounds of Appeal, Appellant has pleaded for setting aside the impugned order on the following grounds: (i) In as much as the physical and mechanical processes carried out by them merely separated mineral sand from naturally occurred ore sand; the separated mineral sand had the same chemical composition; and no upgradation or augmentation of purity too....
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....ortation. It is incorrect to label such purely traded goods as Concentrates. (vii) Even if the processes carried out are accepted as giving rise to a manufactured product, if the value of goods cleared to 100% EOUs constituting 80% and 'as such' sales (traded goods) constituting 15% is excluded from the turnover arrived at for quantification, the dutiable portion would be within the non-taxable limit of Rs. 1.5 crores. 7. When the Appeal was taken up for hearing, Sri. S. Jaikumar, Ld. Advocate appearing for the Appellant requested for setting aside the Impugned Order on the following grounds: (i) As the process/separation undertaken by the Appellant on Titanium Ores did not result in any new product having a distinct name, character and use, the processed Ores were not exigible to duty till 28.02.2011. (ii) Effective from 01.03.2011, Note 4 was introduced in Chapter 26 of the CETA, 1985 which read "In relation to products of this Chapter, the process of converting ores into concentrates shall amount to 'manufacture'" thereby making the processed mineral sands exigible to duty from that date. (iii) Appellant was unaware of this statutory amendm....
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....non-payment of duty only during audit in the year 2014 as the statutory returns pertaining to payment of duty from 08.06.2012 would have reflected duty payments. (viii) During the material time, Appellant was engaged in sale of processed mineral sands as well as sale of sands 'as such'. Major portion of the sale of processed mineral sands took place in two 100% EOUs, namely, M/s Cochin Minerals and Rutile Limited and M/s Miracle Sands and Metals; since both the Appellant as well as the said 100% EOUs were unaware of the duty liability on processed mineral sands, the prescribed procedure (CT-3) was not followed. After initiation of the adjudication proceedings, certificates were obtained from both the units as regards receipt and utilization of the goods for the intended purpose. On the strength of the certificates so obtained, Appellant requested the Commissioner-Adjudicating Authority to exempt the clearances from the purview of levy since clearances to 100% EOUs stood exempted. This plea was not only dismissed with an observation that non-following of the procedure should be regarded as a cover-up for willful intent to evade duty-payment. In the following decisions / jud....
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....015 (324) ELT 656 (SC)] that once a legal fiction is created by a Chapter Note that a process amounts to manufacture, it is irrelevant to test whether a new commodity has emerged or not, to justify levy. (iii) The ratio of the decision of CESTAT in the case of M/s Malu Electrodes Pvt. Ltd. Vs CC Nhava Sheva [2018 (364) ELT 1023 (Tri.-Mumbai)] has no persuasive value since on appeal by the Department, the Hon'ble Supreme Court [2024 (12) TMI 1253 - SC] has set aside the Order by remanding back, with an observation that the CESTAT had overlooked the facts of the case even on limitation. (iv) Board's Circular No. 09/2012-Cus dated 23.03.2012 clarifies that 'Ores' and 'Concentrates' are two different products and Concentrates undergo special treatments (mechanical/physical processes) to remove foreign matter thereby resulting in manufacture. (v) It has been rightly held by the Commissioner that the processes of washing, magnetic separation, shaking tables and drying employed by the Appellant constituted special treatments or beneficiation for eliminating foreign materials thereby converting Ores into Concentrates. (vi) As rightly recorded by the Comm....
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.... was correct in ignoring the plea of the Appellant for excluding 'as such' clearances from the turnover as being without evidence? (iv) Whether invoking extended period of limitation is justified? We will deal with each issue in the context of rival submissions, in seriatim: Issue (i) 9.1.1 At the outset, we notice that in both the SCN as well as the Impugned Order, only 4 digits classification has been proposed/confirmed. While CETH 26140010 covers Ilmenite un-processed, CETH 26140020 applies to Ilmenite, upgraded (beneficiated Ilmenite including Ilmenite ground); as the allegation in the SCN and the findings in the Impugned Order asserts that the physical and mechanical processes carried out on beach sands resulted in mineral separation enabling the Appellant to market the resultant products - Ilmenite and Rutile - as 'Hi grade sands', namely, 70% grade & 80% grade, we reasonably assume that the confirmation of classification is under CETH 26140020. 9.1.2 We find that the main contention of the Appellant is that the imported / indigenously sourced Titanium and other mineral Ores were subjected to mineral-separation processes by physical and mechanical systems....
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....e Earths Limited resulting in emergence of dutiable products were different or dissimilar or incomparable. Instead, supporting their contention that the processes carried out by them did not result in products exigible to duty, Appellant relied on the decisions of CESTAT in the cases of M/s Classic Microtech Pvt. Ltd. Vs CC Ahmedabad [2012 (285) ELT 418 (Tri.-Ahmd.)] and M/s Indian Rare Earths Limited Vs CCE [2002 (139) ELT 352 (Tri.-Kol)]; to contend that the departmental appeal against the latter decision was dismissed by the Hon'ble Supreme Court, vide 2009 (241) ELT A70 (SC). It is the Appellant's case that in the decision reported in 2002 (139) ELT 352 (Tri.Kol) supra, the Bench considered the Supreme Court judgments in the cases of M/s Hyderabad Industries Ltd. Vs UOI and M/s Minerals and Metals Trading Corporation Vs UOI & Others reported respectively in 1995 (78) E.L.T. 641 (S.C.) and 1983 (13) E.L.T. 1542 (S.C.). Appellant also argued that the decision of CESTAT in the case of M/s.Malu Electrodes Private Limited supra which distinguished the CESTAT decision in the case of M/s Indian Rare Earths Limited supra is in their favour. 9.1.4 We find that the CESTAT decision in ....
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....d be considered as "manufactured" and accordingly dutiable. Therefore, in absence of an increase in the purity content by any method, if there cannot be a manufacturing process, the Chapter Note 4 inserted with effect from 1-3-2011 defeat the very purposes and becomes otiose. Such a situation, in our opinion, cannot be the intention of the legislature. Therefore, in our considered opinion application of various processes to ore sand, converts it into concentrates and accordingly in view of the Chapter Note 4 of Chapter 26 becomes manufacture and leviable to Excise duty." 9.1.5 We also find in the case of M/s V.V. Minerals Vs CC Tuticorin [2016 (332) ELT 888 (Tri.-Chennai)] the issue under discussion under identical circumstances came up for consideration before the CESTAT, Chennai Bench. In that case, it was the contention of the Department that the Appellant carried out only physical and mechanical processes and neither roasting or chemical treatment was done nor any enrichment or augmentation of mineral content took place as in this case and, therefore, the goods merited classification under CTH 26140010 as 'Ilmenite unprocessed' and not under CTH 26140020 as Ilmenite upgraded....
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....yed by the respondent amount to beneficiation so as to hold classification under 2614 00 20. It is apparent that the process is undertaken in an elaborate plant employing a string of various mechanical and physical processes. Revenue is implying, by referring to CEGAT's decision in Indian Rare Earths Limited v. Commissioner of Central Excise, 2002 (139) E.L.T. 352 (Tri.-Kolkata), that, because no special process including roasting and chemical treatment is carried out, the process does not result in beneficiated Ilmenite. We are unable to appreciate this reasoning because firstly, the citation referred to is on the manufacture and excise ability of the product and not on the issue of classification. Therefore, reference to this citation is clearly misplaced. Secondly, the fact that mechanical and physical processes by themselves can result in beneficiation of an ore is clearly brought out in the Supreme Court decision in the case of Tata Steel (supra). .............................. It is quite clear that beneficiation process (dense media gravity separation and froth floatation) are a physical separation process to separate higher ash coal and lower ash coal, so ....
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....r metallurgical operations but also ensure economical transport, thereby meeting the definition of the term "concentrates" as above. 9.1.8 In view of our above observations, we have no difficulty in holding that the processes carried out resulted in emergence of mineral Concentrates exigible to duty under CETH 26140020. Issue (ii) 9.2.1 We find that for disallowing the Appellant's claim for exclusion of clearances made to 100% EOUs, it is alleged in para 10 of the SCN that no Form CT-3 was received from the EOUs to clear the goods without payment of duty under Notification No.22/2003-CE without which exemption would not be applicable; and further there was no documentary evidence for receipt of materials at buyers' end. In para 32.2 of the Impugned Order, the Commissioner while dealing with this issue records a finding that '...they have been in the field of manufacture of excisable goods since 1994; they have floated other companies including an EOU; (therefore) Appellant's plea of not-following the procedure due to bona fide belief that they were not within Central Excise net could not be believed as it is nothing but cover-up of their wilful intent to evade duty payment....
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....iled against the CESTAT decisions in both the cases were dismissed by the Hon'ble Supreme Court. Though these decisions were rendered in the context of Section 2(f) of the CEA, 1944 as to whether the processes resulted in any manufacturing activity, yet, the issue involved was whether identical processes carried out for mineral separation resulted in the resultant product being called as 'concentrates'. In the case of M/s.Classic Microtech Private Limited supra, Co-ordinate Bench of CESTAT at Ahmedabad considering an issue under identical circumstances and in the context of insertion of Note 4 to Chapter 26 of CETA, 1985 has held that the items imported were Zirconium ore/sand and did not fall into the category of 'concentrates'. This decision was rendered on 31.07.2012 based on chemical test reports. It is also not in dispute that the ignorance of change in tariff was not confined to the Appellant alone as government units from whom Appellant made purchases were equally unaware of the changes made in the Tariff and they started paying duty only from June 2012 prompting the Appellant to follow suit. We also find from the amended Registration Certificate dated 09.10.2012 issued by t....
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....is impossible to comply with. Hence, applying the legal maxim Lex non cogit as impossibilia meaning 'the law does not compel a person to do what is impossible' and also for the reason that we are more than convinced in this case that there was sufficient cause for the Appellant for not having followed the procedures associated with clearances to 100% EOUs, we hold that not following the procedures cannot result in the Appellant losing the benefit of duty-free clearances. Consequently, we categorically reject the finding of the Commissioner that not following the procedure due to bona fide belief that the goods were not dutiable was a ruse adopted by the Appellant to evade duty payment. We also note that these procedures have been put in place to ensure that the goods despatched are used for the intended purposes. One of the reasons assigned in the SCN for denial of benefit was that there was no documentary evidence to show receipt of goods at buyers' end. We find that responding to a communication dated 28.10,2014 from the Superintendent of Central Excise, Divisional Preventive Unit, Kovilpatti, the Appellant vide its letter dated 04.11.2014, while giving details of clearances, req....
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....ation. We hence find that SCN having been issued only on 01.04.2016, there was adequate time for the Department to conduct investigation as to whether unprocessed or processed mineral sand was sold to the manufacturers of welding electrodes. However, no investigation was ever attempted, to take it to its logical end. This should be viewed in the context of the Appellant's submission that 'as such' removals on and from 08.06.2012 were never doubted/questioned and the Appellant's claim for refund of SAD was also sanctioned by the Department, thereby confirming 'as such' removal of imported sand. In para 33.2 of the Impugned Order, the Commissioner records a finding that: opinion obtained can at best be regarded as the view specific to his product; this suggestion in the SCN is not the main basis for confirming the demand; and the demand merits confirmation for the detailed reasons given. Once it is accepted that opinion might apply to their product alone, as rightly contended by the Appellant, the benefit of exclusion for 'as such' clearances should have at least been extended to that particular manufacturer. It does not stop with that; a question arises as to why the same should ....
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.... their books of accounts nor is it the case of the Revenue that the clearances of the un-accounted goods took place without documents covering their removal. Further, as rightly argued by the Appellant, since there was not even an allegation in the SCN that dry-processing facility available in the 100% EOU was misused for clandestine clearance, we set aside the findings of the Commissioner to this effect. Therefore, we outright reject the charge of clandestine removal of goods. 9.4.3 Appellant is a registered unit for manufacture of various items even prior to 01.03.2011 on which date, the insertion of Note 4 in Chapter 26 took place, construing the process of conversion of 'ores' to 'concentrates' as amounting to 'manufacture'. The process of manufacture remained the same both before and after 01.03.2011. The Department should have been in possession of an adequate database as to the activities being carried on in the registered units. This being the factual position, the Department should have, in right earnest, written to the Appellant as to the changes taken place in the Tariff and asked them to start paying duty, more so when the motto of the present tax regime is 'ease of ....
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....ssioner is reported in 2016 (338) ELT 274 (Tri.-Kol) relating to M/s.Indian Rare Earths Limited, as discussed in the preceding portions of this Order, prior to this decision of CESTAT which was rendered on 29.02.2016, the decisions of CESTAT in the cases of M/s Indian Rare Earths Limited Vs CCE [2002 (139) ELT 352 (Tri.-Kol)], CC & CCE Vs M/s Steel Authority of India Limited [2003 (154) ELT 65 (Tri.-Kol)] as affirmed by the Hon'ble Supreme Court and M/s.Classic Microtech Private Limited Vs CC Ahmedabad decision dated 31.07.2002 [2012 (285) E.L.T. 418 (Tri. - Ahmd.)] favouring the Appellant held the field. No Appeal appears to have been filed by the Department challenging the CESTAT decision supra in the case of M/s Classic Microtech Private Limited. No doubt the CESTAT decision in the case of M/s.Malu Electrodes Private Limited supra which followed the ratio of the decision of CESTAT in the case of M/s.Classic Microtech Private Limited supra was set aside by remand by the Hon'ble Supreme Court. But a later decision of CESTAT on the same issue in the case of M/s.Astron International Vs CC Ahmedabad [2015 (321) ELT 517 (Tri.-Ahmd.)] and which followed the CESTAT decision in the case ....